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Telstra creates 'fences' for structural separation

Detailed migration process to NBN an unknown.

Telstra has taken its first steps toward structural separation, lodging an undertaking with the competition watchdog to meet its obligations by 2018.

The proposed separation [pdf] would require Telstra to ring fence its retail, wholesale and network services business units from one another in an attempt to provide an equal playing field between Telstra's retail unit and other wholesale customers of the company.

Ring fencing would include "explicit rules... to prevent field staff within the Network services BU [business unit] from marketing Telstra services to end users of wholesale customers".

The separation would more clearly define the delineation between units which, at one time, were alleged to have shared confidential information on competitors.

As part of the undertaking, Telstra pledged to more openly define its wholesale pricing for current fixed line services - including the undeclared wholesale DSL service - as well as an economic model to the ACCC every six months.

Wholesale access seekers would be eligible for automatic rebates where Telstra did not meet set availability service levels.

The undertaking also paved the way for the formation of an Independent Telecommunications Adjudicator, first proposed by Telstra in 2008 as a means of revolving price equivalence disputes with wholesale customers.

The telco said in a high-level summary of the separation undertaking that the adjudicator would be able to make binding determinations of up to $1 million for each issue within six weeks or $10 million a year for aggregate disputes.

Revised separation legislative instruments released by the Department of Broadband were worded to ensure the adjudicator would remain independent of Telstra.

Telstra said the proposed separation would avoid the "complexity, cost and industry disruption" of a functional separation.

"We believe the interim equivalence and transparency commitments, which are binding and court enforceable, offer substantial and practical improvements in areas of known industry and regulator concern," Telstra chief David Thodey said in a statement.

"These commitments will provide faster resolution of perceived issues and will reduce unnecessary administrative costs for all parties."

Once the undertaking was accepted by the Australian Competition and Consumer Commission (ACCC), Telstra would be bound by a $10 million fine, enforceable by the Federal Court, should it not meet its commitments.

The watchdog said in a statement it intended to undertake a public consultation around the document within a month.

Migration processes require "further planning"

The migration plan [pdf] submitted to the competition watchdog fell short of providing the full details of how broadband customers would be disconnected from existing copper and hybrid-fibre coaxial services as part of the separation.

Telstra indicated it would use its "business-as-usual processes" to progressively decommission copper lines and migrate broadband customers off hybrid-fibre coaxial in a given area within 18 months of the National Broadband Network passing 90 percent of premises, as detailed in the $9 billion agreement between Telstra and NBN Co.

However, in its undertaking Telstra indicated it would require more planning of particular details around the migration process, including how it would notify customers, mass disconnection of remaining services and how it would ring fence its retail and wholesale business units to prevent information from leaking on the migration.

Telstra also required further planning on how to retain operation of "special services" such as ATMs, EFTPOS machines and traffic lights while industry discussion continued over how these would operate under the NBN.

The company said it would look to complete these details six months after the ACCC approved its migration plan.

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